Every investor in Orocobre Limited (ASX:ORE) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.’
With a market capitalization of AU$954.2m, Orocobre is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about ORE.
See our latest analysis for Orocobre
What Does The Institutional Ownership Tell Us About Orocobre?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
We can see that Orocobre does have institutional investors; and they hold 32.4% of the stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Orocobre’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
We note that hedge funds don’t have a meaningful investment in Orocobre. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Orocobre
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
We can see that insiders own shares in Orocobre Limited. In their own names, insiders own AU$67.9m worth of stock in the AU$954.2m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.